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PAG LIN
1 1 Section 1. NEW SECTION. 15E.41 PURPOSE.
1 2 The purpose of this division is to enhance the quality of
1 3 life for citizens of this state by encouraging the creation of
1 4 new jobs, industry, products, and wealth through the increased
1 5 availability and accessibility to capital, particularly at the
1 6 seed and venture capital investment stages.
1 7 Sec. 2. NEW SECTION. 15E.42 TAX CREDITS.
1 8 1. For tax years beginning on or after January 1, 2000, a
1 9 tax credit shall be allowed against the taxes imposed in
1 10 chapter 422, divisions II, III, and V, and in chapter 432, for
1 11 net losses, as described in section 15E.43, subsection 2,
1 12 incurred by a taxpayer in an equity investment approved
1 13 pursuant to section 15E.43. An individual may claim the
1 14 credit of a partnership, limited liability company, S
1 15 corporation, estate or trust electing to have income taxed
1 16 directly to the individual. The amount claimed by the
1 17 individual shall be based upon the pro rata share of the
1 18 individual's earnings from the partnership, limited liability
1 19 company, S corporation, estate or trust. Any tax credit in
1 20 excess of the taxpayer's liability for the tax year may be
1 21 credited to the tax liability for the following three years or
1 22 until depleted, whichever is earlier. A tax credit shall not
1 23 be carried back to a tax year prior to the tax year in which
1 24 the taxpayer redeems the tax credit.
1 25 2. The maximum tax credit for a qualifying taxpayer shall
1 26 not exceed fifty percent of the taxpayer's original equity
1 27 investment in an approved investment or one hundred thousand
1 28 dollars, whichever is less.
1 29 3. The aggregate amount of tax credits issued under this
1 30 section for taxes imposed pursuant to chapter 422, divisions
1 31 II, III, and V, and chapter 432 shall not exceed a total of
1 32 thirty-five million dollars.
1 33 4. The department of revenue and finance, in consultation
1 34 with the department of economic development, shall develop a
1 35 system for registration, authorization, and redemption of tax
2 1 credits issued by the state under this section. The
2 2 department of revenue and finance and the department of
2 3 economic development shall adopt any other policies,
2 4 procedures, or rules pursuant to chapter 17A necessary for the
2 5 administration of this division and of tax credits issued by
2 6 the state under this section.
2 7 Sec. 3. NEW SECTION. 15E.43 APPROVED INVESTMENTS.
2 8 1. In order for an investment to qualify for a tax credit
2 9 under section 15E.42, the investment must be approved by the
2 10 department of economic development and be in a qualifying
2 11 business. In order to be a qualifying business, the business
2 12 must meet all of the following criteria:
2 13 a. The business is located in this state.
2 14 b. The business has been in operation for five years or
2 15 less.
2 16 c. The business has a business plan which details the
2 17 business's growth strategy, the management team if applicable,
2 18 a production or management plan, a financial plan, and other
2 19 standard elements of a business plan.
2 20 d. The business has an owner who is currently
2 21 participating in, or has successfully completed, a recognized
2 22 entrepreneurial venture development curriculum or have an
2 23 owner with a minimum of three years of management experience.
2 24 e. The business is not a business engaged primarily in
2 25 retail sales, the provision of health care or other
2 26 professional services, or the distribution of products or
2 27 services.
2 28 2. a. A tax credit authorized under section 15E.42 may be
2 29 redeemed for losses of the taxpayer's original equity
2 30 investment realized upon either of the following, whichever
2 31 occurs first:
2 32 (1) Upon the insolvency of the business.
2 33 (2) Upon transfer of ownership of substantially all of the
2 34 qualifying business after a minimum of three years from the
2 35 date of the qualifying equity investment that, at the time of
3 1 the transfer, would demonstrate a documented loss in the value
3 2 of the original equity investment.
3 3 b. The tax credit shall not be redeemed later than ten
3 4 years from the date of the qualifying investment.
3 5 Sec. 4. NEW SECTION. 15E.44 REPORTS AND RESERVES.
3 6 1. By December 15 of each year, the department of economic
3 7 development, in consultation with the department of revenue
3 8 and finance, shall submit a report to the governor and the
3 9 general assembly. The report shall include, but not be
3 10 limited to, the anticipated value of any tax credits issued
3 11 and the estimated current and anticipated impact the approved
3 12 investments have on the state.
3 13 2. The department of economic development shall conduct an
3 14 annual risk analysis which matches the current and anticipated
3 15 value of approved equity investments with the current and
3 16 anticipated value of any tax credits issued. If the
3 17 anticipated value of the tax credits authorized exceeds the
3 18 anticipated value of approved investments, the department of
3 19 economic development shall establish a reserve account within
3 20 the repayment stream of an Iowa agricultural industry finance
3 21 loan made pursuant to section 15E.208 sufficient to cover such
3 22 losses to the general fund of the state in the event that tax
3 23 credits are redeemed.
3 24 Sec. 5. NEW SECTION. 422.11C APPROVED INVESTMENT TAX
3 25 CREDIT.
3 26 The taxes imposed under this division, less the credits
3 27 allowed under sections 422.12 and 422.12B, shall be reduced by
3 28 an approved investment tax credit authorized pursuant to
3 29 sections 15E.41 through 15E.44.
3 30 An individual may claim the approved investment tax credit
3 31 allowed a partnership, limited liability company, S
3 32 corporation, or estate or trust electing to have the income
3 33 taxed directly to the individual. The amount claimed by the
3 34 individual shall be based upon the pro rata share of the
3 35 individual's earnings of the partnership, limited liability
4 1 company, S corporation, or estate or trust.
4 2 Any credit in excess of the tax liability for the tax year
4 3 may be credited to the tax liability for the following three
4 4 years or until depleted, whichever is earlier.
4 5 Sec. 6. Section 422.33, Code Supplement 1999, is amended
4 6 by adding the following new subsection:
4 7 NEW SUBSECTION. 9. The taxes imposed under this division
4 8 shall be reduced by an approved investment tax credit
4 9 authorized pursuant to sections 15E.41 through 15E.44.
4 10 Any credit in excess of the tax liability for the tax year
4 11 may be credited to the tax liability for the following three
4 12 tax years or until depleted, whichever is earlier.
4 13 Sec. 7. Section 422.60, Code 1999, is amended by adding
4 14 the following new subsection:
4 15 NEW SUBSECTION. 4. The taxes imposed under this division
4 16 shall be reduced by an approved investment tax credit
4 17 authorized pursuant to sections 15E.41 through 15E.44.
4 18 Any credit in excess of the tax liability for the tax year
4 19 may be credited to the tax liability for the following three
4 20 tax years or until depleted, whichever is earlier.
4 21 Sec. 8. NEW SECTION. 432.12A APPROVED INVESTMENT TAX
4 22 CREDIT.
4 23 The taxes imposed under this chapter shall be reduced by an
4 24 approved investment tax credit authorized pursuant to sections
4 25 15E.41 through 15E.44.
4 26 Any credit in excess of the tax liability for the calendar
4 27 year may be credited to the tax liability for the following
4 28 three calendar years or until depleted, whichever is earlier.
4 29 EXPLANATION
4 30 This bill creates a personal income, corporate income,
4 31 financial institution franchise, and insurance premium tax
4 32 credit which may be claimed by a taxpayer for net losses
4 33 incurred by the taxpayer in an approved equity investment.
4 34 The bill provides that any tax credit in excess of the
4 35 taxpayer's liability may be credited to the tax liability for
5 1 the following three years or until depleted, whichever is
5 2 earlier. The bill provides that the tax credit shall not be
5 3 carried back to previous tax years. The bill provides that
5 4 the maximum tax credit for a qualifying taxpayer shall not
5 5 exceed 50 percent of the taxpayer's original equity investment
5 6 in an approved investment or $100,000, whichever is less. The
5 7 bill provides that the aggregate amount of tax credits issued
5 8 by the state shall not exceed a total of $35 million.
5 9 The bill provides that in order for an investment to
5 10 qualify for a tax credit, the investment must be approved by
5 11 the department of economic development and be in a qualifying
5 12 business which meets certain criteria. The bill provides that
5 13 a tax credit may be redeemed for losses of the taxpayer's
5 14 original equity investment incurred upon the insolvency of the
5 15 business or upon the transfer of ownership of substantially
5 16 all of the qualifying business after a minimum of three years
5 17 from the date of the qualifying equity investment. The bill
5 18 provides that the tax credit shall not be redeemed later than
5 19 10 years from the date of the qualifying investment.
5 20 The bill provides that, by December 15 of each year, the
5 21 department of economic development, in consultation with the
5 22 department of revenue and finance, shall submit a report to
5 23 the governor and the general assembly relating to the
5 24 anticipated value of any tax credits issued and the estimated
5 25 current and anticipated impact the approved investments have
5 26 on the state. The bill provides that the department of
5 27 economic development shall conduct an annual risk analysis
5 28 which matches the current and anticipated value of approved
5 29 equity investments with the current and anticipated value of
5 30 any tax credits issued. The bill provides that if the
5 31 anticipated value of the tax credits authorized exceeds the
5 32 anticipated value of qualifying equity investments, the
5 33 department of economic development shall establish a reserve
5 34 account within the repayment stream of an Iowa agricultural
5 35 industry finance loan made pursuant to Code section 15E.208
6 1 sufficient to cover such losses to the general fund of the
6 2 state in the event that tax credits are redeemed.
6 3 LSB 5498XS 78
6 4 tm/as/5
Text: SF02421 Text: SF02423 Text: SF02400 - SF02499 Text: SF Index Bills and Amendments: General Index Bill History: General Index
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